APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civ. No. 95-cv-01690) District Judge: Honorable Dennis M. Cavanaugh.

The opinion of the court was delivered by: Weis, Circuit Judge.

PRECEDENTIAL

Argued May 2, 2005

Before: NYGAARD, AMBRO and WEIS, Circuit Judges.

OPINION

In this appeal we conclude that the text of a retention of liabilities provision in a stock purchase agreement requires assumption of CERCLA responsibilities by the seller, rather than simply indemnification. We also decide that prejudgment interest and the cost of an experimental treatment process are reasonable in a contribution suit under CERCLA section 113. 42 U.S.C. § 9613.

I.

Caldwell Trucking Company provided liquid waste disposal service at its premises in Fairfield, New Jersey. From 1948 to 1974, the waste was deposited in several lagoons on the site, but, beginning in 1975, it was stored in tanks and from there taken to ocean disposal facilities.

Defendant Rexon had plants in Fairfield and Wayne, New Jersey where it manufactured electronic components and fuses for military applications. These activities involved the use of de-greasing substances, which are classified as hazardous materials. Beginning in 1960, Caldwell Trucking provided Rexon with waste disposal for all types of materials in the septic tanks on its properties.

The EPA listed the Caldwell property on the National Priorities List of Superfund Sites in 1983 and issued Records of Decisions in 1986 and 1989, calling for remediation of the contamination present there. Caldwell Trucking and nine other firms (the "Caldwell Group" or "Group") acceded to a consent decree in 1994 providing for remediation and reimbursement to federal and state governments for previously incurred expenses. The Group, the plaintiff here, sought contribution from the many customers of the Caldwell Trucking Company. Most of the claims were settled, but because of a dispute over the interpretation of an agreement between defendants Rexon and the Pullman Company, the claim involving them continued.

At various times, Rexon's stock had been owned by several parent companies.*fn1 Relevant to the case at hand was the purchase by defendant Pullman Corporation in October of 1984 and the sale of all of the stock to a new parent corporation in April 1989. The new parent corporation continued operations using the Rexon name until Rexon was dissolved on June 30, 1995. In the interest of clarity, we will use the name of Rexon, despite its varying parentage, to designate the manufacturing entity found to have contributed to the pollution.

II.

On April 6, 1995, the Caldwell Group filed this suit against Pullman Company, Rexon and the other alleged responsible entities. Rexon's registered agents in New Jersey and Delaware were served with process on April 17, 1995 and May 30, 1995, respectively.

The District Court entered summary judgment on liability in favor of the Caldwell Group against Rexon and Pullman. The critical dispute in that phase of the case was the interpretation of a provision in the 1989 stock purchase agreement assigning responsibility for environmental claims against Pullman and Rexon. The District Court defined the issue as whether Pullman was directly liable or whether it was "merely limited to an exclusive indemnification of Rexon."

Particularly important to the District Court's ruling is paragraph § 1.05, captioned "Seller's Retention of Certain Liabilities," in which Pullman "agrees to assume and become liable for, and pay, perform and discharge and to indemnify...." As the District Court construed the agreement, the parties intended to attribute direct liability to Pullman for a wide range of costs associated with violations of, or noncompliance with, "Environmental Laws as of or prior to the closing date" of the sale in 1989.

The Caldwell Group's claims and the judgment in its favor are not based on the parent/subsidiary relationship between Pullman and Rexon, but rather on Pullman's contractual assumption of responsibility. The District Court pointed out that Rexon had become responsible for its dumping from 1962 to 1982 at the Caldwell site, even though the damage had not become manifest until 1986, three years before the sale. The Court ruled that the contractual provision made Pullman directly liable to the Caldwell Group for Rexon's obligations.

Following the entry of summary judgment on liability against Rexon and Pullman, the Court conducted a bench trial to determine the amount of damages. In extensive findings of fact, the Court considered such matters as the appropriate remediation, the proper costs, and the ingredients in the waste generated by Rexon. These factors led to an allocation of expenses among the other waste generators and Rexon.

The Court directed that Pullman should contribute an 8.05% allocation share amounting to $1,873,560.08 and entered judgment in favor of the Caldwell Group for that amount against Pullman, Rexon and Mark IV Industries,*fn2 jointly and severally, plus prejudgment interest and attorneys' fees.

Pullman, Rexon and Mark IV Industries have appealed, alleging numerous errors in the District Court proceedings. Pullman contends that, under the stock purchase agreement, it did not indemnify Rexon or assume its liabilities other than those existing at its own premises, that Caldwell has no right to a direct action, and that the allocation was erroneous. Morever, it is asserted that the cost of one of the remedial means used should not have been permitted, ...

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